Jumia Technologies AG, the parent company of Jumia Kenya, recently disclosed a case of employee fraud where an individual managed to siphon approximately $150,000 (Sh21.2 million) by manipulating vendor payment records. The incident, Business Daily reports, discovered in September 2022, sheds light on the risks of fraud faced by the e-commerce platform.
According to Berlin-based Jumia Technologies AG’s filing with US regulators, an employee in Kenya was found to have manipulated certain vendor payment entries and misappropriated payments over the course of 2021 and 2022. This incident has prompted Jumia to acknowledge the challenge of anticipating, detecting, and addressing fraudulent activities within its platform due to the large number of participants and the fragmented nature of its business.
In response to the allegations of employee misconduct, Jumia has taken steps to enhance its internal controls and cash reconciliation system. The company recognises the potential impact of fraudulent activities on its operations, finances, and reputation, emphasising the need to effectively address such risks.
Jumia Technologies AG, which encompasses Jumia Kenya, identifies the failure to effectively deal with fraud and the occurrence of fictitious transactions on its platform as significant risks to its business. While the financial impact of the employee fraud case was not substantial, similar illegal or collusive activities could have severe consequences for the company, including financial implications, legal risks, and reputational damage.
This incident is not the first time Jumia has faced financial losses due to fraudulent activities. In 2019, the company reported significant financial losses of at least KSh118 million over a two-year period, attributed to consumer cyber fraud and theft. Additionally, a break-in at their Kenyan warehouse resulted in the loss of KSh56 million worth of merchandise, and fraudulent use of electronic payment providers by a group of customers in 2017 cost the company KSh62 million.
Fraud has become a growing concern in Kenya, with the country being ranked among the world’s major hotbeds for money laundering and fraudulent activities. As a result, many companies operating in the East African country are increasingly wary of the risks associated with fraud.
Technological advancements have brought both opportunities and challenges in addressing this issue. For instance, Safaricom, a prominent telecommunications company in Kenya, has observed a rise in the number of employees being dismissed due to offenses related to fraud during the period ending in March 2023.
